Thoughts on the Next (4th) Covid 19 Stimulus Package
The US now leads the world in Covid 19 patients and Covid 19 deaths because we failed to react and address the problem when it was small and manageable in the ways that South Korea, Taiwan and Singapore initially did. Now we face an intertwined and very severe economic and medical crisis. Congress will need to pass a fourth stimulus package to address the crisis.
First, we need to know what worked and what did not in the Third Stimulus Package. Second, we need to identify what are the most pressing unmet needs that have to be addressed in the next package. Third, we have to develop the broadest and deepest possible coalition in order to enact it quickly and effectively. Fourth we now need to begin to think about structural reforms, not simply bail-outs.
We face both a health and an economic crisis; the health crisis is likely to continue for the next 18 months until there is an effective vaccine; it may roller coaster with repeated outbreaks of infections. We do not yet have any solid expectations of the length and severity of the economic downturn, which is linked to resolution of the health crisis; there have been hopes for a rapid V shaped recovery counter posed by those projecting a longer U shaped recovery.
The third stimulus package was well designed as a temporary bailout but has failed to date to deliver financial assistance in a timely fashion to the unemployed, to small employers and individual taxpayers. This has led to long waiting lines for food assistance in many major cities. Long lines of school families waiting for meals at school sites are now commonplace.
· The small business Paycheck Protection Program requires a three-way partnership and transactions of the businesses, the banks and the Small Business Association/US Treasury. The banks have lacked the guidance and support of SBA and Treasury making them reluctant in turn to loan to the imperiled small employers, particularly those who lacked the requisite connections to an already SBA approved bank. This can be fixed, but some small businesses and some of the self-employed are running out of time, cash and patience to meet payroll. An additional infusion of $250-500 billion may be very urgently needed.
· The UI expansion to the gig workforce and the bump in UI assistance by $600 a week has been plagued by the inability of state UI programs to rapidly process 17 million new applications. In addition coverage of the gig workforce is brand new so the gig workers must be informed and educated as to how to document their past and current income to successfully apply. The state UI programs need adequate and timely guidance from the US Department of Labor. So this excellent and important aspect of the CARES Act is plagued by a combination of antiquated and overwhelmed state UI processing and slow and confusing federal guidance on the gig workforce eligibility.
· The electronic stimulus checks have started to go out this week to those taxpayers who are electronically linked to the IRS. The mailed out checks are going to be a good bit slower, possibly taking as long as the middle of September for some taxpayers. The amount of those checks are probably sufficient to meet a family’s needs for one month while this crisis is not going away in a month or even two.
The health care sector’s efforts to treat Covid 19 have been plagued by inadequate and poorly performing diagnostic tests, insufficient supply of ventilators, masks and personal protective equipment. The Third Stimulus did nothing to address these shortages although it did include $100 billion for the costs of treating uninsured Covid 19 patients and constructing new temporary facilities for the care of Covid 19. While treating Covid 19 patients have been the priority, the rest of their medical practices have ground to a quick halt. The health sector says it needs another $100 billion in additional funding to combat Covid 19. The highest priorities need to be developing effective treatments and an effective vaccine, effective testing and the ability to quickly identify and quarantine those infected. The stimulus funding for hospitals and medical practices needs to be very carefully targeted to those who are seeing heavy burdens of Covid 19 patients; it is not clear that the current and any new funds are being so designed and distributed.
The state and local governments have been in the front lines of addressing the pandemic. The crisis has exposed the woeful underfunding of their public health systems, medical supplies and equipment. The mantra for the next cycle is “test, track, treat and isolate”; we are not ready and not staffed and not adequately funded to do any of these. The economic meltdown will drain state and local tax revenues and explode the needs for public assistance programs and spending for the low income. Congress appropriated $150 billion for state and local governments. State and local governments estimate that they will need $500 billion in the next package.
$500 billion was appropriated for payroll protection loans for large businesses and an additional $50 billion, of which half is pure bailout, for the airline industry. Treasury and the airline industry have just completed negotiations on the grants and loans to keep the airlines in business and their employees on payroll. This aspect of the CARES Act has been criticized as the President’s slush fund with little or no public transparency or accountability. President Trump is resisting and obstructing internal and external oversight over these very large CARES Act expenditures. Lobbyists for hotels, tourism, agriculture, finance and airlines are seeking more targeted funding in a next Stimulus package.
To date, Congress has been acting in a bi-partisan fashion; this may continue or not. We should be ready to praise and acknowledge this unusual consensus. We, however, have failed to meaningfully address the Covid 19 crisis in institutional settings such as jails, detention centers, long term care settings such as nursing homes and among those most marginalized, such as the homeless or the undocumented workers, and others living and working on the forgotten edges and nooks of our society or the wrong sides of the digital divide.
Certainly consensus will not continue if we begin to move, as we should, to the structural reforms needed in our economy, our health, safety net, and tax systems. We should all be shocked and appalled at our inability to rapidly and domestically manufacture the masks, the PPE, and the ventilators, and so we need to rebuild manufacturing prowess and innovation. Our health system needs to be universal, and it needs to be less expensive, and it needs to be far more accountable to achieving better health outcomes for those most vulnerable and least empowered. In my mind, the German system is an easier transition for the US than the Canadian, and it is at least as effective as Canada, if not more so. In our current crisis, we have rediscovered the importance of the nation’s UI system and how badly broken it has become. It needs to be expanded to the gig workforce and others with no protection under the current UI eligibility rules. The benefits are far too low in some states; there needs to be a federal floor – e.g. 3/4ths of your last year’s weekly wages. The federal tax system has become an abomination in its favoritism for the wealthy and politically well connected; it needs a thorough rethink and rewrite to return to its more progressive roots. Andrew Yang appears to have been prophetic in outlining the need for a Universal Basic Income (UBI); we need to look at how to design our nation’s systems that respond to the future of our economy and society in a post-industrial society. Many of us are inventing telecommuting on the fly; is that our nation’s future? These reforms are utterly impossible with Mitch McConnell in charge of the US Senate and Donald Trump as the nation’s President. We have become locked in a stale national debate with Donald Trump and Bernie Sanders reflecting the polar stagnation of the national imagination; neither represents what will be needed for the nation’s future. It is possible that leaders with courage and compassion like a Newsom, Cuomo, Hogan or Baker do.
There may be greater agreement on the necessary steps to reopen the state and local economies. Donald Trump wants to be out front leading this parade in sharp contrast to being Missing in Action and in denial throughout the crucial first three months of the pandemic from mid-December to the middle of March. The nation’s Governors, who have done the hard work and have now become trusted messengers, are not ready to turn over leadership of the response to this pandemic to a President who has been so singularly inept, clearly AWOL, and out of his depth. The nation’s Governors from the East, West and parts of the Midwest are coordinating regionally to re-open as quickly as one can in reasonable safety to the entire population. This requires widespread testing, contact tracing and isolation of the infected. This will not be easy, as we now have none of the above in place. I found some degree of comfort listening to Cuomo and Newsom outlining the re-opening of the economy in the past few days. We need to marry strategic patience, compassion, vision and clear communication in our political leadership.
Prepared by: Lucien Wulsin
Dated: 4/15/20